Source: Carnegie
"On the Multilateral Development Banks in a Changing Global Economy"
Economic Perspectives Electronic Journal of the U.S. Department of State, Vol. 6, No. 1, February 2001
Nancy Birdsall and Brian Deese
Despite quantum increases in private capital flows to developing and emerging-market countries, there are still good reasons for the multilateral development banks (MDB) to continue their activities in these countries. The new private flows -- mostly to middle-income developing countries -- are highly susceptible to reversal, and, in difficult times, the private loans may be unavailable or too costly. MDB financing plays a valuable counter-cyclical role in these economies, and MDB lending can help "crowd in" private investment, signaling a country's commitment to reform.
Nonetheless, the MDBs need to adapt their policies to the changing demands of their members. MDB pricing should become more product and country specific, and new products should be designed to better deal with emergencies and non-lending services. The MDBs should take advantage of the HIPC initiative as a chance to become more selective in their lending practices, and should re-juggle representation within their institutional structures to better reflect changing realities.